The staircase that spans the three floors of flats that are No 4 Pushkin Street can't have seen a coat of paint since 1997, or even before perestroika. The wall tiles are chipped; cigarette butts clutter in corners; the banisters wobble, exhausted on their iron stilts.

A three-hour train journey from Moscow through snow-covered pines, the provincial town of Tver reveals a Russia rarely seen. Here, the lives of the 130 million people outside the political and economic crucible of the capital flit between blind poverty and nascent prosperity; between pensioners who scrub doorways to pay for their heating and high streets lined with mobile phone shops.

Eight years ago, the G7 became the G8 when President Boris Yeltsin first attended the annual summit of the world's major industrialised democracies as a fully fledged member. Then Russia was the sick man of Europe, months away from an economic crisis, with a president known for little other than drink and disaster.

But yesterday, in a coup for President Vladimir Putin, Russia assumed the presidency of the G8. The former KGB officer has been bent on seeing Russia's superpower status restored since he came to power following Yeltsin's resignation on New Year's Eve 1999. But as he takes his place at the head of the table, his fellow diners wonder whether he should be there at all.

High oil prices have boosted Russia's economy; state control over the energy sector has begun to restore the geopolitical clout nuclear weapons used to provide. But what about the cornerstone of the G8 - democracy? Do Russians get to say who runs their country, and, if not, do they care? At No 4 Pushkin Street, the gradual improvement of life behind each steel flat door is a mixed story of freedoms lost for stability gained, of individual liberties sacrificed to the promise of greater wealth.

At Flat 11, Anton, 48, and Elena, 46, are stakeholders, albeit minor ones, in the economy. Their fridge, DVD player, Volkswagen estate and espresso machine suggest they are part of the 30% of Russians deemed middle class. A former state radio engineer, Anton turned entrepreneur and now sells groceries from his car. Elena is a nurse. But they seek no such stake in Russia's political life: neither could be bothered to vote in local elections that day.

"It will not change anything", said Anton. "They say we have democracy, but what is it? Money decides everything in the world. Yeltsin brought us anarchy, but at least we have a little order with Putin now."

He noted how the local governor, Dmitri Zelenin, voted in effortlessly with Putin's backing last year, had built some new roads. But he echoed the broad distrust of government - "vlast". It is a Russian word used for those in "power", one that conjures the ghost of centuries of authoritarian misrule. "The state used to look after us", he said, with Soviet nostalgia. "Now they just look after themselves."

But upstairs, Valentina, 54, at Flat 15, is fond of the Kremlin head. "He is not a drunk [like Yeltsin]," she said. "Things have got a lot better under him." It is an unlikely statement about a president who has, in effect, cut the pension she won after 11 years working amid the fumes of a plastic window factory. Her monthly stipend rose from £52 to £68 this year, but she lost her 50% pensioner discount for medicine, utility bills and public transport.

But she remembers the "nightmare of the 1990s", a period of graft and economic chaos when wages came late, if at all. "It was the hardest time of my life". Her daughter, Natasha, cuts in: "What do you mean by democracy anyway? It doesn't exist anywhere in the world."

For those too young to remember the Soviet Union or to have properly felt the turbulence of the 90s, however, today's "managed democracy" - the term used for the controlled political climate that Mr Putin has created - is no boon.

Another floor up, at Flat 18, is Olga, 21, a student living with her parents. In last year's presidential election, she ticked the box marked "against all". She said: "It's a recognised fact in this country that people only run for office to line their pockets. No one new comes to power, whoever you vote for."

For her generation, a dysfunctional democracy is a lesser evil in a society that has become riddled with deeper sores since the collapse of the Soviet empire. This is how Olga feels about the police: "They're the second mafia, the last people you turn to. They like to charge someone with a crime and then wait for a bribe." Corruption also troubles her university, where she said students get places through bribes, or because of someone they know, although she insisted that she was an exception.

The same callous system means that a university education seems, to Dima, 16, downstairs at Flat 14, a matter of life and death. Without it, he will have to join the million-strong army as a conscript. Tales abound of conscripts driven to suicide by their officers' beatings. "None of my classmates want to go. If I can get five years at university and then another two years postgraduate, I will be 27 and too old to be drafted."

University can cost £650 a year if you don't get a state-funded place, said his mother Anna, 36, a former university teacher who teaches telesales for £350 a month. Her husband, Misha, earns the same selling car parts. They holidayed recently in Riga and Paris. "We are not like the European middle class, but we live better" than other Russians, Anna says. They have only one child as more would be too expensive. "The biggest problem is demographics. This region is dying. I went to a local village recently where they said 40 people had died this year and nobody was born."

She insisted that Russia's economic gains - everyone in this article has a mobile phone, for instance - are down to market development, not Mr Putin's two terms. "I don't like him, or those KGB types." But on a staircase inclined to dismiss rather than fight for democracy, Anna is the only one old enough and willing to say life has improved since Soviet times because it is freer. "We can go abroad now," she said. Dima added: "Imagine life without shops."

Yet Anna fears a slide towards a more polarised, controlled society. "I fear that we will become less western and more eastern, closer to the Asiatic model, where there are the very poor, the very rich, and few people in the middle. We're a people who lived too long under Genghis Khan."

Even the Kremlin can acknowledge a thriving democracy and civil society is not the work of years, but generations. Old habits die hard, and talk of bad government prompted Dima to joke: "You know why it's better to steal a million rubles than a hundred? With a million you can pay everyone else off."